In an auction, a variety of decisions must typically be made by each of the participants. When the auction is run by the seller, the bidders must decide whether or not to bid. Upon deciding to bid, they must decide how much to bid. This decision process is conditional on information that the bidder has available regarding the objects being auctioned, rivals, etc.
The seller and/or the person who runs the auction must make decisions regarding what auction format to use and the reserve prices for items to be auctioned. Additionally, the seller must consider entry fees, quantity of items to be auctioned, timing and duration of the auction, lot sizes, bundling of items, sequence of lots, bid increments, information disclosure policy, etc. Standard auction formats include sealed bid first price, Dutch, sealed bid second price(or Vickrey), English, etc.
Recently, methods have been determined for assisting the buyer and the seller in making these decisions. These methods typically involve analysis of prior auctions for determining the joint distribution of private information and for determining risk attitudes.
One prior art method for analyzing auction data assumes that bidders are risk neutral and uses observed bids from available types of auctions to estimate the joint distribution of private information. However, if the assumption of risk-neutrality is incorrect, estimated joint distribution of private information will have no systematic relation to the true distribution and hence cannot be reliably used as input in formulations of decision problems.
Another prior art method for analyzing auction data uses estimation models that are restricted to parametric families of functions for determining the joint distribution of private signals and for determining risk attitudes. However, there is no theoretical or empirical basis to justify the a priori restrictions imposed on the forms of the latent functions that are to be estimated. Therefore, this method also gives unreliable results.
Thus, conventional methods for analyzing auction data do not provide sufficiently accurate results to be of use to either the buyer or the seller in making the necessary decisions. Therefore, buyers and sellers must use personal knowledge and experience to make decisions on a personal, best-guess basis.
Accordingly, there is a need for a method and apparatus that will assist the buyer in making decisions relating to a particular auction. In addition, there is a need for a method and apparatus that meets the above need and that will assist the seller in making decisions relating to a particular auction. Moreover, there is a need for a method and apparatus that meets the above needs and that allows for accurately determining bidder's private information. In addition, there is a need for a method and apparatus that meets the above needs and that allows for accurately determining risk attitudes.